May 17, 2021, is long gone, and many of you probably forgot why it was an important date. Due to COVID-19 and other factors, the usual IRS April 15 tax filing deadline was extended for 2020 Tax Returns. Today, except for those taxpayers who filed for an Automatic Extension, 2020 Returns have been examined. Now, large numbers of taxpayers are receiving dreaded mail with the IRS logo in the return address section of the envelope. For those who have never found the IRS logo on their incoming mail, it is never a good feeling. No exceptions.
This year, the largest group of taxpayers receiving IRS correspondence are receiving math-error letters. IRS has sent more than 14 times more math-error letters than were sent last year. The good news is that math-error letters are not audit notices but rather requests to correct information that doesn’t match IRS records. Most math-error letters for 2020 Tax Returns are due to economic stimulation payments made following the beginning of the coronavirus pandemic in early 2020.
Economic stimulus checks were authorized for Americans whose annual incomes were below certain specified limits. Determining who was eligible required IRS to use tax data from past years to prepare a list of 2020 recipients. For the majority of taxpayers, that information has not changed substantially. But, for a significant group of payment recipients, rising incomes eliminated all or part of their eligibility. As a result, many people received payments to which they were not entitled. Now, IRS wants to be reimbursed. Soon.
We should note that the result of any math-error letters correction may result in a lower refund, or a tax due, which must be paid in a timely manner. Unfortunately, IRS neglected to convey impatience by leaving out the 60-day deadline for responding to the math-error letters. Now, at taxpayer expense, they are sending follow-up letters to inform people that time pressure exists. Failure to comply may result in referring the Tax Return to the IRS Audit Department.
In case anyone believes that the current math-error problem is a one-off, next year’s math-error letters will likely be more numerous and more complicated. There are additional child tax credit payments being made to many people in 2021, which must be documented on Tax Returns filed in 2022. Rules for these payments are different and more complicated than last year’s payments. Further, many more people had rising incomes this year as they regained employment, and will end up ineligible for the child tax credits paid to them in 2021.
Eligibility rules are posted on the IRS website (www.irs.gov). If you have received a math-error letter and/or tax credit payments, it would be wise to visit the website and become familiar with the eligibility rules.
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